FEA seeks $1billion dollars

by Elenoa Baselala

Fiji Times - Wednesday, June 16, 2010

THE Fiji Electricity Authority needs more than $1.1billion to "strengthen" its existing transmissions and invest in future transmission networks.

Chief executive Hasmukh Patel said this was essential in order to transport electricity from the new sources of power generation to customers, and to successfully meet the ever-increasing demand for power.

He said last week that a realistic tariff based on the cost of production would enable FEA to do this.

"The power transmission and distribution networks that need to be strengthened or constructed have been identified and preliminary works have commenced," he said.

The power provider needs $375million for its capital expenditure on generation, $210m for the Independent Power Producers (IPP) and $520m for FEA transmission, distribution and retail.

"FEA plans to fund some of these schemes and expects the private sector and independent power producers to fund the remaining mainly power generation projects," Mr Patel said.

The FEA already has government guaranteed debts worth $400m, which was confirmed by Public Enterprises head Aiyaz Sayed-Khaiyum at the Fiji Institute of Accountants Congress last week.

At the same meeting, Reserve Bank of Fiji governor Sada Reddy voiced his concerns on the State's liabilities, particularly in bailing out some of the statutory companies whose debts the State had guaranteed.

In particular, Mr Reddy gave the example of the Housing Authority where close to $40m worth of debts were transferred to equity as the organisation could not service its debts.

Mr Patel said the FEA could not further increase its debt levels to fund the identified projects as existing cash inflow was insufficient to enable funding for these projects.

But if it does not do anything, the possible scenarios would be inability to meet increasing demand of electricity, high fuel bills due to reliance on diesel generation, power rationing and its inability to service its debts could result in the immediate repayment of the loans and exposing the government as the guarantor.

While tariff realignment was approved by the Commerce Commission two weeks ago, Mr Patel recommends a detailed tariff study to establish the realistic tariff levels that would enable the FEA to implement its development program, facilitate the entry of IPPs, ensure long-term financial sustainability and achieve financial returns.